Is the 10% compound annual increase on a ten-year fixed-term land lease contract Islamically permissible, given that the monthly rent starts at EGP 500 in the first year and increases by 10% annually?
It is permissible to conclude an ijara (lease/rental) contract for a period that does not immediately follow the contract, and it is permissible for it to be for consecutive years, with a specific rent for each year, and each year is considered an independent contract. It was mentioned in "Kashshaf Al-Qina'" that it is not a condition for the ijara period to immediately follow the contract. Also, it was stated in " Standards" that the rent must be known, and it is permissible for it to be a fixed amount or variable according to a method known to both parties. Therefore, there is no harm in the aforementioned contract, whereby the rent for each year is greater than the preceding one.
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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- Summary from Ftawy's records, reviewed by El Fatwa's sharia committee.
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- Read the full answer on Ftawy